Gambling
Related Essays and Reports by Andrew W Scott

Social
Responsibility for Gambling Establishments

June
12th 2007

No-one
denies that Australia has seen a gambling explosion
(some would say epidemic) over the last decade. We
now have thirteen casinos, racing totalisers nationwide,
and a flourishing internet-fuelled bookmaking industry.

But
there is a fundamental question that is yet to be
sorted out in this country. What happens when a gambling
establishment knows or suspects that the money a punter
is losing is most probably stolen, or at the very
least clearly beyond the apparent means of the punter?
Does a social responsibility exist? Is there a duty
of care to the punter, or indeed to society at large?
What enquiries, if any, should gambling establishments
make to ascertain the source of funds of a gambler
losing obscene amounts of money? Should gambling establishments
be forced to return monies they reasonably ought to
have known were stolen, or were lost by a punter clearly
out of control, acting with some type of diminished
capacity fuelled by their gambling addiction and/or
alcohol?

It
is now clearly established that premises licensed
to serve alcohol have a duty of care to their patrons,
and must "cut a patron off" when he has had too much
to drink. The difference with gambling is that there
are millions of dollars involved. This is a huge incentive
for gambling establishments to turn a blind eye.

Take
the case of Kim Faithfull. Faithfull was manager of
the Commonwealth Bank branch at Karratha, in Western
Australia. From 1998 to 2003, he embezzled $19 million
and lost $17 million of it, over the internet, almost
exclusively to IASBet, a Northern Territory based
bookmaker headed by celebrity bookie Mark Read. There
is no doubt IAS knew what Faithfull's job was - they
even sent a couple of cases of Grange to him at the
bank in Karratha. There are accusations that Read
instructed staff to ignore the issue of the source
of Faithfull's funds, because Faithfull was an unskilled
punter and was consistently losing serious money.
He would lose hundreds of thousands of dollars a week.
Clearly his salary, in the order of $60,000 a year,
wasn't funding these losses.

The
CBA was clueless to the scam until a near suicidal
Faithfull suddenly confessed. He was sentenced to
five years jail. The judge questioned how the "absolutely
breathtaking" thefts could go undetected by the CBA
for so long, but also how IAS continued to take the
bets, knowing who Faithfull was and what he did for
a living. At the time the CBA issued this abrupt 92
word statement. The statement mentions that
no customers lost money, but ignores the cost to CBA
shareholders. CBA lodged a claim in the Federal Court
alleging IAS "wilfully shut its eyes to Faithfull's
fraud, or consciously refrained from inquiry" as to
the source of the stolen funds, and sought $17 million
compensation. Mark Read said the claim would be "vigorously
defended". Years of legal battles ensued, reportedly
costing IAS $1.6 million in legal fees, before last
month it was announced that IAS settled, repaying
the CBA $7 million. The IAS board described the settlement
as "fair and reasonable".

Sadly,
this is not an isolated case. Dennis Telford, a company
secretary and CFO, was charged with stealing $22 million
from K&S Corporation, owned by trucking magnate and
racehorse breeder Alan Scott, and betting it with
Sportingbet, another Darwin based bookmaker. In a
civil action by K&S, the judge found that Sportingbet
knew Telford's identity, that they had "wilfully and
recklessly failed to make inquiries an honest and
reasonable man would have made" and ruled that K&S
was entitled to $2.78 million held by Sportingbet.

In
the wake of these cases, apparently the Northern Territory
Racing, Gaming and Licensing has written to NT online
bookmakers asking what investigations they undertake
to check suspicious transactions. I am unaware of
any replies.

So,
what is the answer? Do gambling establishments have
a responsibility to society at large? With the enormous
amounts of money in superannuation, almost every Australian
is effectively a shareholder in large companies whose
employees could be embezzling monies to lose to bookies
and casinos. When this happens there is a direct reassignment
of wealth from Mum and Dad shareholders to gambling
companies. Should gambling establishments owe a duty
of care to their patrons? Should they refuse bets
from patrons that are intoxicated? Should they refuse
bets from patrons who are clearly emotionally devastated
from their ongoing losses? These are questions that
we, as a society, are going to have to answer.